Reference no: EM132779047

On January 1, 2017 Palmar Corporation borrowed $500,000 at 8% from State Bank for the specific purpose of constructing special-purpose real estate used to be in its operations. Construction on the real began on January 1, 2017 and following expenditure were made prior to the project's completion on December 31, 2017.

Other general debt existing on January 1, 2017 was as follows:

Bond Payable: $900,000, 14%, 10-year
Note Payable: $300,000, 10%, 5-year

Problem a. Please compute the portion of the interest expense that should be capitalized based on the information provided.

Problem b. Please record the journal entry to appropriately account for interest incurred.

January 1           April 30           November 1            December 31          Total
$400,000         $300,000           $240,000              $100,000            $1,040,000